SC seeks finance minister’s view on interest waiver – Times of India

NEW DELHI: RBI’s misgivings over waiver of interest on loans during the six-month moratorium on payment of EMIs did not impress the Supreme Court, which on Thursday gave the finance ministry a week to think over the issue and file a considered response to interest waiver on borrowings, including home loans.
The RBI’s affidavit before the SC had said that banks were intermediaries between depositors and borrowers and apprehended that any move to waive off interest on loans would have a direct impact on interest earned by depositors. Moreover, it could severely impact the banking business, the central bank had said.
A bench of Justices Ashok Bhushan, Sanjay Kishan Kaul and M R Shah called out the RBI for leaking its affidavit to the media even before its stand could be articulated before the court and made it clear that it was unimpressed with the regulator’s position, which affected crores of borrowers, especially those who have availed home loans.
Senior advocate Rajiv Dutta argued that banks would charge interest and add that to the principal every month and then charge interest on interest even when the “eyewash” of a moratorium on repayment of EMIs was enforced. “In fact, the borrower will be required to pay much more than what he would have ordinarily paid if there was no moratorium because of this interest on interest concept,” he said.
Solicitor general Tushar Mehta told the court that though the RBI has filed an affidavit, it has to be a joint stand by the government and the regulator. “I have not yet consulted the finance ministry on this issue. I will get back with a considered opinion by the next date of hearing,” he told the court.
The bench said, “Mehta shall obtain necessary instructions from the finance ministry as well as higher officials of the Reserve Bank of India, for which he prays for a week’s time.” The matter was posted for further hearing on June 12. If the government agrees not to charge interest on interest, or allows waiver of interest, then it would create fresh complications as those borrowers who have regularly paid EMIs without availing the moratorium would be disadvantaged for abiding by the loan agreement. For, they have paid not only the EMIs but the interest accruing on the loan amount.